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In this paper, the use of the machine learning algorithm is examined in derivation of the determinants of price movements of stock indices. The Random Forest algorithm was selected as an ideal representative of the nonlinear algorithms based on decision trees. Various brokering and investment...
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theory (cf. e.g. Mukherjee, 2017; Veltri, 2017). This article proposes so-called Dynamic Factor Trees (DFT) and Dynamic … reduce to the standard Dynamic Factor Model (DFM) as a special case and allow us to embed theory-led factor models in …
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